ADM wins GrainCorp board approval for $2.3 billion takeover

GrainCorp stock jumps to highest level since it began trading in 1998

Archer-Daniels-Midland Co., the world’s largest corn processor, won agreement to acquire GrainCorp Ltd. for A$2.2 billion ($2.3 billion) after raising its offer with a special dividend for shareholders of the Australian crop handler.

ADM will pay A$12.20 a share for the stock it doesn’t already own, subject to an examination of GrainCorp’s finances to be completed next week, Decatur, Illinois-based ADM said yesterday in a statement. Investors in Sydney-based GrainCorp will also receive a A$1-a-share special dividend prior to the completion of the deal.

Buying GrainCorp, the only major publicly traded grain merchant left in Australia after the country deregulated its wheat-export system, would give ADM control of seven of the eight ports that ship grain in bulk from the nation’s east coast as well as a substantial malt producer. ADM made an initial bid last year, building its stake to 19.9%.

“The board signed this agreement, they’re allowing due diligence and are happy with the offer and I think shareholders should be too,” John Maysles, an event-driven senior analyst at Elevation LLC in Los Angeles, said by phone. “It’s pretty much the equivalent of raising the bid by a dollar by allowing them to pay that dividend.”

GrainCorp jumped 7.9% A$12.81, the highest since it started trading in 1998 in Sydney. ADM gained 1.9% to $33.80 at 10:06 a.m. in New York.

Asia Demand

“ADM and GrainCorp have complementary geographies with little overlap and highly compatible cultures,” ADM Chairman and CEO Patricia Woertz said in the statement. “The addition of GrainCorp to our global network would fit our strategy and help to further connect Australia’s growers with growing global demand for crops and food, particularly in Asia and the Middle East.”

Sales at GrainCorp, which has benefited from growing demand from Asia, have jumped since Australia’s 2006 decision to strip AWB Ltd. of its wheat export monopoly. ADM’s proposal underscores a push by companies including Glencore International Plc and Hong Kong-based commodity trader Noble Group Ltd. to target agricultural assets, betting on rising demand from Asia as living standards and diets improve.

“Today’s decision isn’t a decision the board has taken lightly and in fact it’s taken us some time to reach this point,” Don Taylor, GrainCorp’s chairman, said today on a call with reporters. ADM’s offer “highlights the strategic value of our business.”

Biggest Deal

Buying GrainCorp would be ADM’s biggest deal. The largest so far is its $470 million purchase of W.R. Grace & Co.’s cocoa business in 1996, according to data compiled by Bloomberg. The offer carries a 50.1% minimum acceptance condition, and needs to be cleared by Australia’s Foreign Investment Review Board as well as China’s Ministry of Commerce of the Government, known as MOFCOM. Glencore’s C$6.1 billion ($6 billion) acquisition of Canada’s Viterra Inc., completed in December, was delayed as it awaited MOFCOM clearance.

“We don’t have any particular anticipation that any of them will be difficult,” GrainCorp CEO Alison Watkins said on the media call. “The MOFCOM approval is uncertain in its timeframe and we would see it as probably the longest timeframe of the approvals that we require to achieve.”